The comments came after Russian officials yesterday formally told the UK they would not extradite Mr Lugovoi.

In May, the UK asked for Mr Lugovoi, a businessman and former KGB agent, to be extradited over the killing of Litvinenko, the Russian dissident who died of radiation poisoning in London last November.

Today, Gordon Brown's official spokesman said Moscow's offer to try Mr Lugovoi in Russia had been ruled out by Sir Ken Macdonald, the director of public prosecutions, on the grounds that it would not meet standards of "impartiality and fairness".

The spokesman said Britain was now considering further options, adding: "We deeply regret that Russia has failed to show the necessary level of cooperation in this matter."

The case has compounded fraught relations between Moscow and London - which were difficult even before Litvinenko's death - with the Kremlin accusing London of spying and helping pro-democracy organisations in Russia.

Today, Sir Ken hit out at the Russian decision. "The allegation against Mr Lugovoi is that he murdered a British citizen by deliberate poisoning and that he committed this extraordinarily grave crime here in our capital city," he said. "The appropriate venue for his trial is, therefore, London."

Litvinenko, a former KGB agent who was living in London, was poisoned with the radioactive isotope polonium 210. In a statement on his deathbed, he accused the Russian president, Vladimir Putin, of being behind his killing. Mr Putin and Kremlin officials have denied any involvement.

Moscow suggested Mr Litvinenko's murder was masterminded by foreign-based enemies of Mr Putin such as Boris Berezovsky, a billionaire oligarch living in exile in London.

Mr Berezovsky, a friend and benefactor of Litvinenko, has also accused the Kremlin of involvement in his death.

Russian authorities said the country's constitution barred the extradition of citizens, although there had been signals Moscow could "exchange" Mr Lugovoi if the UK extradited Mr Berezovsky.

Instead, Mr Berezovsky will be tried in Russia in his absence, accused of embezzlement and money laundering. He believes the proceedings against him are part of a ploy to create a distraction from the Litvinenko case.

Last week, the CPS said Mr Berezovsky would not face charges in the UK for talking about plotting a "revolution" in his homeland. The Kremlin had demanded action after Mr Berezovsky told the Guardian that force was needed to oust Mr Putin.

At a press conference, Mr Lugovoi claimed Litvinenko had been working for MI6, the British foreign intelligence agency, and that British intelligence may have had a hand in his death.

He also claimed Litvinenko tried to recruit him to work for MI6 and gather compromising material about Mr Putin and his family. Mr Berezovsky rejected the claims.

Litvinenko left Russia after claiming that Russian intelligence agents, rather than Chechen rebels, had organised a series of apartment block bombings in Moscow in 1999.

Mr Lugovoi and another businessman, Dmitry Kovtun, met Litvinenko on November 1, the day the dissident said he became ill. Radiation traces were found at several locations connected with the men, including the Millennium hotel bar where they met him.

Both were questioned in the presence of British investigators in Moscow in December, and Mr Lugovoi's extradition was requested in May this year. Mr Putin called the request a "stupidity".

Mr Lugovoi said he had been in London to watch a football match between Arsenal and CSKA Moscow.

Around 700 people were tested for polonium contamination in the UK, with some 670 people tested abroad.